China - Country Commercial Guide
Cosmetics and Toiletries Industry
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According to Euromonitor International’s latest research, sales of beauty and personal care in China reached $88 billion in 2021, a rise of 10% on the previous year. Color cosmetics and fragrances saw particularly impressive growth on the back of the wider recovery, with a notable increase in consumers trading up. This had a resultant impact on premium sales and product upgrades - a clear reaction to the pandemic, with people wanting to treat themselves and enjoy some glamour, following prolonged uncertainty and austere compromise.  The rapid evolution of e-commerce and retail digitalization spearhead new growth opportunities.

Online Retail

Chinese consumers spend a significant amount of time online reviewing products and often base their purchasing decisions on recommendations from family and friends.  China’s e-commerce platforms are increasingly influential in impacting consumer purchases by providing a platform for the beauty community to share shopping and product experiences.  For example, according to a Daxue Consulting study, the social media and e-commerce platform Xiaohongshu (Little Red Book) has attracted over 200 million users.  These users, who are predominantly female and under 26, fit into the target demographic for imported cosmetic product sales. Among online channels, livestreaming has rapidly grown into a major sales platform for cosmetics, which are often marketed to the smartphone-savvy consumers who shop via this method. Livestreaming, which doubled its market share from 2019 to 2020 and now makes up roughly 10% of Chinese e-commerce, will be an integral part of any successful multi-channel sales strategy.  Many brands find less barriers when selling through online channels, as regulations differ from those for products sold in traditional storefronts.

Challenges and Barriers

China’s regulatory environment can be challenging for foreign companies to navigate, with many barriers to entry.  All cosmetics products sold through traditional channels must be approved by the National Medical Products Administration (NMPA).  Even if the product has already been tested overseas, it still must be tested in one of China’s NMPA-designated testing facilities before it can be sold in Chinese stores.

U.S. companies must carefully follow all market entry procedures, product registration requirements, and specific labeling guidelines to enter and do business in China successfully. China currently requires a registration process with animal testing and a hygiene permit before imported cosmetics can enter the market.  Obtaining the hygiene permit requires a PRC  legal entity, or for overseas cosmetics manufacturers without representation in China, assistance from a PRC agency.  The foreign company is required to sign a “Letter of Authorization,” confirming that it authorizes a PRC company to be the registered responsible party in mainland China for its products.

China has recently softened its animal testing requirement for domestic retail sales, and no longer requires the test if the manufacturer’s home country issues a certification of the production quality management system, known as a Good Manufacturing Practices (GMP) certificate.  State government endorsed GMP can be accepted by NMPA for animal testing waiver. Besides Animal testing, other in-country testing requirements and disclosure of confidential business information (CBI) and trade secrets, as well as administrative delay due to the COVID shutdowns are also listed as top industry concerns.

China’s Regulation on the Supervision and Administration of Cosmetics was revised in 2021, and these regulations are currently in the process of being implemented.

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